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Sagot :
The expected share price after the third dividend is GH¢ 20.22
What is stock price?
The stock price can be determined as the present value of future dividends, years 1-3 and the present value of all dividends beyond year 3 which is known as the terminal value(i.e. the unknown selling price after the third dividend as required in this case)
The terminal value is the present value of future dividends after 3 years which needs to be discounted 3 years backward in the process of computing share price
Share price=12
Year 1 dividend=1
Year 2 dividend=2
Year 3 dividend=3
Terminal value=unknown (assume it is X)
discount rate=32%
Each future dividend can be discounted using the present value formula of a single cash flow shown below:
PV=FV/(1+r)^N
FV=each future cash flow/dividends
r=discount rate=32%
N=the year of dividends, 1 for year 1, 2 for year 2
12=1/(1+32%)^1+2/(1+32%)^2+3/(1+32%)^3+X/(1+32%)^3
12=3.20978378829618+X/(1+32%)^3
12-3.20978378829618=X/(1+32%)^3
(12-3.20978378829618)*(1+32%)^3=X
X=(12-3.20978378829618)*(1+32%)^3
X=GH¢ 20.22
Find out more on terminal value on:https://brainly.com/question/25818989
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